CA leads drop in foreclosure filings

SPOTLIGHT ON REAL ESTATE

Updated 3:48 pm, Friday, October 12, 2012

Signs such as this one in Richmond are becoming fewer as California foreclosure filing drop.

Signs such as this one in Richmond are becoming fewer as California foreclosure filing drop.

Photo: Justin Sullivan, Getty Images

CA leads drop in foreclosure filings

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California, the state that led the country into the housing boom and bust with some of the most reckless subprime mortgage lending, is now leading the way out.

A plunge in new defaults in California helped push U.S. foreclosure filings to the lowest level in almost five years, RealtyTrac Inc., a seller of home-loan data, said Thursday. Across the country, 531,576 properties received notices of default, auction or repossession in the third quarter, down 13 percent from a year earlier and the lowest since 2007. One in every 248 households got a filing, RealtyTrac said.

California, the birthplace of subprime mortgage lending, saw an explosion of foreclosures thanks to such industry innovations as "no-doc" loans that required no proof of income.

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The state's recovery is mirrored by U.S. home values that rose 1.2 percent in July from a year earlier, according to the S&P/Case Shiller index of property prices in 20 major cities. It was the second straight 12-month advance and the biggest jump for the real estate gauge since August 2010.

"We're starting to see improvement in some of the hardest-hit areas, strong demand, competitive bidding on properties and rising prices," said Sean O'Toole, chief executive officer of ForeclosureRadar.com.

The gains are moving in tandem with foreclosure declines as lenders control the flow of bank-owned homes that come to market, crimping inventory and pushing up prices, said Daren Blomquist of RealtyTrac.

Initial filings in September fell in 31 states, led by California, which dropped to a 69-month low. Defaults dropped 45 percent from a year earlier, 34 percent in Arizona, 22 percent in Michigan and 21 percent in Georgia, RealtyTrac said.

Home sales in California's biggest population centers climbed in August to the highest level since 2006, according to real estate research firm DataQuick. Median house and condominium prices in six Southern California counties jumped 11 percent from a year earlier to $309,000, while values in nine counties in the San Francisco Bay Area gained 11 percent to $410,000, the company said.

In Antioch, Vallejo and Riverside, homes that sold for $400,000 at the peak have been purchased for about $130,000 each and renovated for the rental market, said Gary Beasley, managing director of Oakland's Waypoint Real Estate Group LLC.

The mortgage industry, which lowered underwriting standards to increase loan volume and fuel price gains, used so-called robosigners to handle the flood of foreclosures that followed.

Driving the recovery in California has been the relative speed it has worked through foreclosures, in part because home repossessions there don't require judicial review as they do in about half of U.S. states, said Ivy Zelman, CEO of Zelman & Associates LLC.

A new California law that goes into effect Jan. 1 may make it harder for lenders to seize property, which could delay the clearing of distressed homes and a swifter statewide recovery, Blomquist said.

"We've been seeing a downward trend in new defaults, while the market in California is gradually improving," said Blomquist. "The danger is that the law will delay foreclosures in the short term, and be followed by a spike down the road."